Iraq oil production increasing but problems remain

Baghdad
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In August Iraqi oil production reached the highest level in over 30 years. In spite of sabotage and inner political struggles oil production continues to increase.

The Kurdish government has decided to continue exports in spite of disputes with the central government. Although oil production brings in the greatest amount of income in Iraq, agriculture employs far greater numbers of Iraqis. Iraq is thought to have reserves of about 115 billion barrels, and is one of the few areas around the globe where there may be considerable unexplored oil resources.

There have been continuing disputes between the Kurdish government in the north and the central Baghdad government. In April the Kurds temporarily held up oil exports as the central government threatened to blacklist companies that signed contracts with the Kurds without the approval of Baghdad. In August however international oil companies again began exports and the central government approved $560 million in payments. Payments due could soon reach $1.5 billion and the Kurds expressed willingness to negotiate an end to the disputes about the powers and share of revenues of the two respective governments.

Iraqi development has been relatively slow. Unemployment is very high at 18 per cent. Corruption is rampant with Transparency International giving Iraq a score of 1.8 placing Iraq 175th out of 182 countries. This is much worse now than it was under Saddam Hussein!

Even with all these problems Iraq has now become the second largest oil producer within the Organization of the Petroleum Exporting Countries(OPEC) and is also third in oil reserves.

While the political crisis between Kurdistan and Baghdad has slowed production and exports there are also still attacks by terrorists that have targeted pipelines that move the oil to Jihan Port for export. The International Centre for Development studies said that sabotage of the pipeline had cost Iraq about $125 million in just one week. The group also said that political conflicts have prevented Iraq from moving exports up from 175,000 a day to about 200,000.

The Centre's report notes:“...many international oil firms [are] reluctant to enter the Iraqi market, taking into account that the central government in Baghdad is threatening not to pay international firms working in the Kurdistan region.” If the two governments are able to negotiate a successful compromise this could result in faster development of Iraqi oil and increasing revenues for both the Kurdish area and Iraq as a whole.